What is the best expected return you could achieve

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Question - Suppose you have recently accepted a new job and are setting up your retirement allocations within the firm's 401k plan. The plan options contain two risky mutual funds, A and B. You may assume that all fees are the same across the two funds. Fund A has an expected return of 6% and the standard deviation of returns is 12%. Fund B has an expected return of 7% and the standard deviation of returns is 15%. The correlation between returns on the two funds is 0. The plan also contains a Treasury fund which provides a risk-free return of 3%.

Maintaining the restrictions on your investment choices from the last question, what is the best expected return you could achieve if you set up a portfolio with a standard deviation of returns equal to 10%?

Reference no: EM132971072

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